How To Deal With Breach Of Contract In COVID-19 Lockdown28th May 2020
Are you owed money? Has your supplier failed to deliver? You can still get justice – even in lockdown.
Anyone who thinks the coronavirus restrictions will allow them to evade their legal obligations is mistaken. The courts are still operating. You can still sue (and be sued).
COVID-19 And The Courts
The courts are open for business. They are processing new claims as well as progressing on-going cases.
Hearings are taking place, mainly through video conferencing or by telephone. However, a final hearing requiring the attendance of witnesses may be adjourned for the time being. There are real technical challenges involved in getting the Judge, claimant(s), defendant(s), advocates and experts online at the same time.
Parties are trying to overcome the shortfalls of online communication to progress cases and obtain judgments.
Certain types of litigation are currently restricted (forfeiture, possession and some winding up petitions). But these cases will become possible again in the future.
Collect Debts Quickly
Cash is key to the survival of any business. A loss-making company might be able to struggle along for a while…but running out of cash is fatal. Even profitable businesses can run out of cash.
So it is as important as ever to keep on top of your debtors (whether trade or consumer). Can you require payments up front? Can you insure against the risk of bad debt?
If not, make sure you have a focused credit control procedure. Contact our debt recovery lawyers as soon as possible; the longer you leave any debt, the less likely you are to be paid.
Goods Fail To Arrive
Consumer Sales
Did you pay for your goods by credit card? Contact your credit card company if your goods fail to arrive. Request a refund.
Report the delivery failure to the marketplace (Amazon, eBay, Gumtree). They all have their own complaints procedures. You may not always get compensation from them but you may be able to stop others from losing out.
Ultimately – if none of the above works – you can sue for the return of the money you paid out. But remember that with online sales, the seller may not be in this country.
Business Sales
The informal methods above may not be available to businesses so court proceedings may be the only option.
Your Customer Is In Financial Difficulties
Did you run credit checks? Did you seek and obtain personal guarantees? Are you insured?
If not, you may need to use the court process to help you collect your debts. You could threaten the debtor with insolvency proceedings.
Directors of limited companies can still be held personally responsible for business debts in certain circumstances, such as if they:
- have signed a personal guarantee
- knew the company was insolvent but continued to prioritise shareholders over customers
- sold off company assets for less than market value (or gave them away for free)
- raised funds through fraudulent means – such as providing inaccurate information to obtain finance
- accepted money for goods they had no intention of delivering.
Before embarking on litigation, you must be sure the company or person you are suing has sufficient funds to make the process worthwhile. Winning in court is a hollow victory if the defendant has no money.
How To Avoid Litigation
Check your terms of business. Is there a force majeure clause? If there is, can you end the contract as a consequence? Find out more about force majeure, partial performance and frustration in this blog post about school fees.
If you need more time, it is best to talk to the creditor. Let them know the problem (cash flow) and how you propose to resolve it with a positive plan.
It is always best to resolve disputes out of court if possible. But the threat of going to court is still very real – even if the logistics are more complex now.
Get Expert Advice
Do not delay. Getting expert legal advice early can help to prevent a business dispute from becoming more protracted, time-consuming and expensive.
Contact Coles Miller Managing Partner Neil Andrews, head of the Commercial Department for more information.
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This document is not intended to constitute and should not be used as a substitute for legal advice on any specific matter. No liability for the accuracy of the content of this document, or the consequences of relying on it, is assumed by the author. If you seek further information, please contact Managing Partner Neil Andrews at Coles Miller Solicitors LLP.
